>> put spreads in pepsi. >> mike? >> good opportunity to sell some premium. >> our time has expired. i'm melissa lee. check out our website, optionsaction.cnbc.com. i'll see you monday for "fast." don't go anywhere. "mad money" with jim cramer starts right now. my mission is simple. to make you money. i'm here to level the playing field for all investors. there's always a bull market somewhere and i promise to help you find it. "mad money" starts now. hey, i'm cramer! welcome to "mad money." welcome to cramerica. i'm trying to make you money. i want to educate you, so call me at 1-800-743-cnbc. we can go higher. we can go higher too. i mean, come on isn't that how you felt? that's how you felt after this week we were put through. didn't it sound surprising we
can rally. the nasdaq was slipping, it lagged. yes, if you own stocks, that's the saving grace. they do sometimes go up. me, i'm glad this week is over, we're finally limping into the last week of the quarter. so what's our game plan given the -- just the tremendous decline that we had relative to the rest of the year but not relative to the rest of our decade? well, i have a security. it's funny, i usually don't skart -- have the security. i want you to put it at the top of your screen and it's called the tmx and it represents the ten-year treasury. it's way to monitor the interest rates without having a compute their shows you the actual bond trades because almost every time it went up the stock market went down a few minutes later. in other words, this is a predictive measure. that's right. until the stock market adjusts
to the higher trade environment, the little tmx was what we needed to predict the markets. unless they hang out here for a while and maybe go lower, meaning the tmx stabilizes or going down in price then we'll go down. this is the pied piper of the s&p. particularly on the day when the fed had the meeting and this was going down, the s&p was kind of staying the same and then it followed it. well, i mean, the interest rates were going up. the s&p was doing nothing. and then when the s&p saw the interest rates go up after a little bit, this thing, boom. this tells you first that's why we'll follow it. now, do you think i'm being too binary? there's an interesting question. no. i'm just old. i've got a memory for previous periods of interest rate voltai voltairety. i used to trade bonds for a living and then the interest rate competition for bonds. i cared more about the bonds than stocks.
the bond market was much bigger -- is much bigger than the stock market. if rates were going higher i went net short, i had more money bet against stocks than against them. if rates were going lower i'd try to get more long than short. i let the bonds determine how much i was doing. i figured that the bond market was going to be right and the stocks would be wrong and the whole '09s it was the right call. at least if you want to make money. on monday, i want you to see how it leads both of them until we get to the level where they have done their climb or people figure this out. but we're not there yet. you know who can protell the tmx higher? how about richard fisher, he gives a speech money. this man has been a one-man wrecking crew. paul crew and the wrecking crew. he's a total monetary hawk who has been chafing at ben bernanke to cut off the bond buying program for years now.
he sees growth in inflation, even where it ain't. i wouldn't be surprised he said that the fed should take interest rates higher and then actually raising the fed funds rate. i'm not kidding. i would not put it past this guy. please be mindful of what a loose fed cannon can mean to the stock market. sell sell sell. those are all -- this fed guy, he ought to get a sound board. he doesn't have to talk. he can hit those things. oh, man. tuesday, kay shiller. remember it used to go down all the time, that's weird. the housing market got to hot to keep the mortgage rates as low as they have been. you see vegas up 28% year over year. that's too hot for me. if this goes up, the dreaded tnx will roar and then the stocks will go higher again. this is a degree of difficulty game now. like the olympics. we get new home sales in ten,
okay. get this. if they're too hot, traders might say, wow, we have to sell stocks because now the fed is really going to walk away from bond buying. if new home sales are cooling traders will pummel the horrendously performing housing cohort into oblivion. did you see whirlpool today? and lennar said more than -- not more than two weeks ago the business is good. speaking of massive selling, carnival cruise reports tuesday. and while there are apparently have been no instances of mishaps on the high seas lately, i think this one has become a free firing zone short stock, despite the fact that the founding family owns the heat. my advice take the heat, leave the carnival. want the trade of the day? it's actually walgreens. i like this stock very much. if the market gets hit on monday, like from the brazilian riots or whatever the heck else
they'll throw at us, you might want to snare some lag going into the earnings report on tuesday. wednesday, we hear from a company that has got the pulse. it's called paychex. probably see them on air. lots of people are flummoxed when the fed chief said things are getting boater because it doesn't field better. the small business creation hasn't picked up. it's what paychex and the processing company for small business has been telling us on the show for a long time now. and look i would like to hear from paychex that business has improved. i'll get more confident that it's improving in a sustainable way that bernanke can't hurt. how is retail doing? well, why don't we listen to the conference call after bed, bath & beyond? even though the first three quarters were disappointing, but i think they'll get hammered again. they might give you a sense of how much people are spend on the homes. another driver of the economy has slowed down of late.
slowed down for all but the galleries of restoration hardware. there's been a rough couple of weeks for the consumer package good names. they had been viewed as bond market equivalents. was that proctor up for real, was that j&j rally for real? we have to know. when they report on wednesday, big g. and mccormick and conagra report on thursday, we'll find out if they can actually have more than just a dead cat bounce. if the numbers are good and the stocks go up maybe they're no longer hostage to the tnx i told you to follow. but you know, if the tnx goes higher and the stocks go down, we're in the same world of hurt. why am i showing this? this is from mccormick spice, old bay spice the special ravens model. i think it's cool. it might not matter if the interest rates keep going higher though, so remember it's the
bond market stupid. two companies -- two companies that delivered terrific quarters last time around, nike and accenture give us the report cards on thursday. nike has been strong in the u.s., weak in china. i have no idea what piece going on in the whole country. accenture is a huge business in europe. i think europe is still stabilizing and they have done a superior job even when europe was not doing well. one of the head winds it's able to endure which is why i like it. it's a terrific consulting play. accenture goes down, you buy some. finally, blackberry, aka formerly known as research in motion. i think that that's because people always believed that blackberry is a hair's breath away from being taken over. you want to sell it if it's trading around 15. if they disappoint and they usually do, at 15 you're vulnerable and we get another macro number on friday, that's the chicago pmi.
and if this crucial industrial indicator is strong, then i think again interest rates will rise and the stock market this fall. this market cannot afford to have that positive data right now, so expect it to end with a whimper, not a bang if the chicago pmi comes in over 25 which is a signal that ben bernanke should have pulled the magic money carpet out from under us months ago. and that he did it too late. that's a predominant theme you'll hear, he waited too long. get used to the different market, the one where interest rates rule the roost. events from out in left field drive the stocks and the stocks aren't needle movers. once the rates overshoot and start backing down, we'll get used to the craziness and accept the fact that the rates aren't going back. then we can have a better sense of who earnings report mean for stocks. back to the future in the 1990s where all we cared about the bonds, secondarily to stocks. in those days the bonds were doing fine. we can buy all we wanted but if bonds were getting hammered it didn't matter what the company
had to say no matter how well it was doing. can i go to ellen in kentucky, please? >> caller: hi, jim. i am intrigued by the whole 3-d sector. i'm wondering what you think about ssys with the purchase of maker buds this week. >> that's our favorite in this group. it's held up rather well. remember, we are in a market where interest rates are controlling and this kind of stock goes down when interest rates go up. let's be very careful. let's go to harold in florida. >> caller: hi, jim. harold here. i'm asking about weyerhaeuser, wy. they went down in the last month. i'm surprised, is it because the ceo is retiring? >> no this is owned by my charitable trust and it's real bad. the people think the housing boom is completely over so it's
twice cursed. that's why it's one of the worst performing stocks in the second quarter. i think that will reverse. that's why charitable trust owns i. welcome to the new normal where interest rates are more important than stocks themselves. "mad money" will be right back. coming up, brace for a bounce. investors were sick to their stomachs as markets come off one of the worst weeks of the year. but tonight, cramer is sifting through the rubble to find stocks that could be the first to bounce back. and later, life savers? the rough seas rocking the market may have you wondering if you should abandon ship, but what hottest stocks could sail ahead of the danger? cramer reveals the captains just ahead. and fear factor, scared to jump in thinking there's more pain to come? cramer is testing the technicals to see where we could go next when he heads off the charts.
all coming up on "mad money." don't miss a second of "mad money." follow @jim cramer on twitter. have a question? tweet cramer #mad tweets. send jim an e-mail at firstname.lastname@example.org or give us a call at 1-800-743-cnbc. missomething? head to email@example.com. [ male announcer ] we've been conditioned to accept less and less in the name of style and sophistication. but to us, less isn't more. more is more. abundant space, available leading-edge technology,
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over wednesday and thursday, we got exactly the kind of bearish bombing raid i told you to expect, one that created a crater where the averages used to be. we reached the time where it was time to pick through the rubble. finding stocks you can already buy into this pull back. so what will bounce back fastest from the bombing shelters that i still think, you know what? you have to stay in somewhat? i have scrutinized the charts and i have come up with five stocks that i think you should consider buying. given their tremendous price declines from the highs. these are stocks that have come down so much their dividend
yields have reached levels where they have provided real protection. i think these are the names that could have real bounce back potential even if interest rates go up slightly more. first of all, i think you should buy not one, but two of the health care real estate investment trusts. they have big dividends that got too high and then people came in at the top and then blew out the stocks aggressively. people thought they owned a bond. now though, now you have to think of health care as an industry that will be stronger. not weaker. because obama care is going into effect starting next year. i like first health care reit, and they own senior housing hospital facilities and medical office space all across america. in the last month this stock has come down from 80 to $62 that's a 22.5% decline and there's a 4.9% yield. wouldn't it be terrific to have that in your portfolio? second, i like health care trust of america, this is one of the largest openers of medical office buildings in the country
with tons of real estate all across the nation. it's an $11 stock with a 5.3% yield. it has come down 22% from the highs. these health care real estate investments trusts have come down enough. next, look at this one. liberty property trust. lry. it's a commercial real estate investment trust. liberty has fallen some 10 points from 45 to less than 35. bingo, another 22% decliner. and isn't that amazing? come on it is. at the these levels they give you a 5.4% yield. remember, there's no serious commercial real estate going on in this country. this makes the situation better for an incumbent property owner. fourth, arcp, currently pays a monster 6.4% yield. hay hey this is one of those
that's been down 20% over the last month. american realty capital, their tenants have pay rent and insurance costs. this business model is about as safe as it gets. hence why the company has 100% occupancy rate. they're doing it the best, they're acquiring other ones. three weeks ago, they announced they're buying 471 net lease properties from ge capital. these properties are mainly tenanted by recognized restaurant chains. three days before may 28th, we learned that arcp is acquiring cap lease for $2.2 million that will be added to the earnings and it will be the third largest net lease reit in the business. even better as soon as the deal closes, they said they'll boost the annual distribution by 3 cents which would bring the yield up to a bountiful of 6.5% at the levels. these yields have gone up big because the stocks have been
crushed. but limited partnership and that's lynn energy. the independent oil and gas producer has an 8.5%. the highest of any i follow. it's been targeted by the short sell evers from the november highs. they said they're getting access to one of the hottest finds in california. now barron's has been on a real gee jad and they don't like their accounting practices. the articles have given the short sellers a lie sense to dump the stock in order to drive lynn to a level where barry would walk away from the stock deal. the key to the future growth. this is an achilles heel. i figure barron's will take it still lower. don't buy it all on monday. but my mentor came on judge wapner's show on cnbc and he
said he spoke to the ceo of bar barry petroleum and he said they're committed to the deal. their experiments have looked at lynn's accounting and they feel comfortable. now he owns 3% of the lynn and he believes this $33 stock is worth around $49 and i agree with him. lynn said it will raise the distribution. it would launch the yield over 9% which is why my charitable trust owns the stock. lynn will begin to pay the distribution on a monthly basis rather than a quarterly one. it will hurt the short sellers. it will cost them month after month after month. i think some of the shorts might want to declare victory. break away from their young ringleader who's got everybody all agitated and leave them alone. here's the bottom line. it's safe to start picking among the rubble as i told you on day three with high-yielding stocks that have come down 20, 22% and
the dividends offer real protection. they're bouncing back like health care reit, liberty property trust and my favorite, leon cupperman's backer lynn energy. stay with cramer. coming up, life savers? the rough seas rocking the market may have you wondering if you should abandon ship. which of this year's hottest stocks could be about to sail ahead of the danger? cramer reveals the captains just ahead.
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after the thrashing we've taken over the last few days it's hard to think of anything positive but if you want to drag your portfolio out of the rubble you need to get constructive. no matter how worried you are about rising interest rates and i'm very worried about it, there are some things that just don't change. like the mechanics of the money management industry. yesterday, i told you how we're approaching the end of the second quarter. that means two things. things that can send the stocks higher -- markups and the window dressing. hedge funds and mutual funds need to prove they're doing a good job. i'm good. in order to do that many money managers will mark up the major holding. basically, they go in and buy these stocks in quantity in order to purpose them higher into the end of the quarter. and, you know, of course obviously all your stocks go up in value, right? so therefore you multiply it by
the number of shares you have, bip go, you have gotten some percentage gains. when you have people doing it to the same stock at once they can make that stock move. at the same time, they want to show their investors they're smart. they didn't miss the big winners and that's the thing called window dressing some the clients don't berate them for being such morons for not having an idea on what is a hot stock that's why with the last trading day of the second quarter only one week away, i highlighted the s&p 500's best performers, our second quarter cap since last night's show. those are the ones that will come sail away. for the same reasons tonight, i want to tell you about the best performers in the s&p year to date. because we're also coming to the end of the first half. plus, because we finished up today, do you mind, i want to be a little constructive. we're going to go through the s&p's five biggest gainers, the ones for the year. the year to date captains because they're prime candidates for both markups and window
dressing. number one, netflix up 134%. number two, best buy. which's rallied at 126%. the best one is micron, 119%. in fourth, we have got hewlett-packard, gaining 70%. and last, amd. another name that's one of the best performers in the quarter, up 67% since the beginning of the year. these are the stocks that have the wind at their back. hence like come sail away thing. styx, yeah, who was that? styx. hey it's a different kind of show. it's been a tough week! you ask your cameraman you get the answer. anyway, they've got the wind at their back as we approach the end of the quarter. i think all five can conceivably trump the gravitational pull of the bond market longer term particularly if we get used to elevated interest rates. that would be what we'd like. so for those of you who didn't catch the show last night let me give you a quick recap of the
top five performers year to date. that's micron and amd. and these are two old school retro tech, totally anti-did louvrian when dinosaurs ruled the world. tech stocks will be the new meters in the second half. amd is a play on the next generation of video game consoles as they make the processors for the upcoming systems. sony's playstation 4, i bet you can't wait for that one. and microsoft xbox 1. i have xbox 0. this is deram, not ram shop which is the kind of thing i want to open up at one point in my life. but the d ram used in most computers. in the old days there were ten players and now amd is about to acquire a firm that will turn it into a three-wayle oligopoly. they allow them to stay low and
that's what's happening here. which is why micron is one of the favorite stocks out there. i like the last quarter. how about the three other top performers of the year? netflix, best buy, hewlett-packard. boy, these used to be horrible. what's worst to first, the slow ones will later be -- fast ones now -- times they are achanging. i forget the words i'm tired. no i'm not. never admit you're tired, ever. anyway, these are three classic comeback stories that were left for dead and have now come roaring back. the number one performer year to date is netflix. netflix made a terrible blunder when the company announced plans to separate the dvd rental business from the streaming business and they put through a big price increase. investors jumped ship. hence why it fell from $300 to the low 60s, but nose who wrote off netflix made a big mistake. they're like hbo, producing their own contempt, think of
arrested development. they're adding subscribers like crazy. they had 3 million streaming viewering. i believe this fabulous growth story has more room to run. even with a $12 million valuation i think it would make a ton of sense for facebook to buy netflix. how about best buy? second best performing in the s&p year to date. this time the ceo hads left in a highly public exit. everyone thought the company was simply a show room for amazon. stock drifted down to 11 and change at the beginning of 2013. but since then they've been roaring back. mostly because they should never have been that low like netflix and best price, they're cutting costs aggressively. they have no competition left and they're focusing on improving the customer experience in the store. i hope they do, because boy, i don't really get that good of a
customer experience there. i get the boot camp hospital thing there. plus i can see best buy getting a real boost from the new video game cycle. i just mentioned it. and then the year's best performer -- hewlett-packard. lazarus like under the excellent leadership of meg whitman. she's cut costs dramatically. she's cleaned up the mess and restructured a bloated work force. what more could you ask for as an individual? and it was a stellar better than expected quarter. it's pulled back since then, but they're the kind of tech that will work in the new environment of higher rates and a stronger economy. especially with the competitor like dell which will soon be hobbled misray like james caan, steve king in a misguided attempt to go private or pay it out with borrowed money. look at the best performers for the year now that we're entering the first half. that's netflix, best buy,
hewlett-packard in addition to micron and amd. all i can say is take your pick. si in texas. >> caller: hey, jim, what do you think about r.r. donnelley. do you see more upside to this stock? >> you know, it's so funny, a lot of time the viewers call and they're asking -- it drives me crazy -- about a stock that i can't figure out how the heck it got there to begin with. i thought that yield was too high. i thought the dividend would be in trouble. i thought they'd cut it. let's do this for si. let's do a segment on how a stock like donnelley could come back from the dead. i promise that. it's a another lazarus stock. maybe we'll do a lazarus series starting next week. stewart in new york? >> caller: stu from the bronx, how you doing?
my concerns -- a hard stock. caterpillar. >> i am concerned that caterpillar is faltering. they have made a series of mistakes. well, blunders. blunders even. now, it doesn't matter. the business is hard, i no etkn that the business is hard. the numbers don't look that good. all that said, it yields 3%. when it gets to 3% which would put it under 80 even though i don't like how it's trading i will say buy buy buy. this is the time to look for the stocks that have the wind at their backs. yesterday i told you about micron and amd. liked them both. this time it's best buy, netflix, and it's hewlett-packard. take your pick. don't move. "lightning round" is next. >> fear factor, scared to jump in thinking there's more pain to
"lightning round" is sponsored by td ameritrade. we talk a lot about leveling the playing field here on "mad money" so i want to take a moment out to give a big boo-yah to cnbc's own ayman javers for breaking a huge story. on wednesday, he came on our show to talk about thompson reuters gives some the information two seconds early. fast forward after the initial report we have learned that the conference report -- which publishes market moving data has announced it will stop giving the day to the media early. so boo-yah, ayman. great work. by the way, whoefeveryone who i doing the two tiered stuff i don't like.
now time for "lightning round" on "mad money." buy buy buy buy. and my staffers -- and then the "lightning round" is over. are you ready, steve? time for the "lightning round." tommy in wisconsin. tommy! >> caller: you'll always be my idol. >> thank you. >> caller: can you tell me anything about a stock called pba? >> instead of being in that one, i want you in lynn energy. there's a young fellow, trying to make his name. each time they hit it, boom. it's like hitting muhammad ali. i don't want to go there. jim in colorado, jim? >> caller: hi, jimbo. thanks for all your hard work and your analyses. >> doing my best. it's tough out there. what's going on? >> caller: i want to find out what you think about lng by the end of the year? >> i think lng is in a holding pattern. i think they have done a lot of
great things but now we have to see if they can open up the plans in time. if not, the stock is going to go lower. if they do, it's going higher. we're in no-man's-land and i don't like to be there because of the cross fire. phil? >> caller: boo-yah, jim. welcome from the greatest capital of the world. listen, jim, i'm a proud grandpa, but i'm trying to figure out -- i love it, i'm getting back to even and then this weekend what do you think of fcr? >> oh, man, you know, these are bond market equivalents. i don't like the telcos or the bond market equivalents. i think you have to take a pass there. kyle, kyle in new hampshire. kyle? >> caller: hello, jim. thank you for all you do. you're a wonderful guy. >> i'm trying, thank you. >> caller: i'm glad to have you as my mentor. i'm kyle from new hampshire, i'm 25 years old. earlier this year i bought radiant, i took your advice.
how does it play into the -- >> as i said at @jim cramer on twitter, nobody wants to hear anything bad. immediately i'm blasted as someone as trying to take radiant down. i have liked them for a 50% move. all i'm saying if people stop buying as many homes the stock will get hit a little. i would stick with it, but understand i never ever ever get angry when someone takes a profit. hey, why don't we go to george in new york? >> caller: jim, representing wake forest school, can i get some demon deacons love? >> yeah. i love the demon deacons. let's hit it. >> caller: i want to know what you think of a stock that's got a great run this year and the ticker symbol is axl. >> it's still cheap. still cheap. and i believe in the autos. i worry that the stocks will
roll over in the last three, but you have a winner. but remember, right now the market is uncertain and it will take out of a lot of the darlings and this is one of the last darlings that hasn't been hit. i think everyone will get pummelled and you can buy more. that's the conclusion of the "lightning round"! >> the "lightning round" is sponsored by td ameritrade. >> i'm talking about red robin gourmet burgers. lock at the size of this? anybody like steak fries? versus bloomin' brands. remember the outback steak? i bet you can't eat just 1,000 calories. and we pit them against each other. see which one is better. which is better for your heart? [ laughter ] clear channel al gore on the hand is mainly billboard
oriented. [ laughter ] what was that? did someone say something? did i really? you're trying to stop me. who here thought that she was signaling stop it? let's go to shelly in new york. shelly? >> caller: boo-yah from shelly baby in brooklyn, new york. >> hey, i was all over your town, what's up? >> caller: you're all over every place, sweetheart. you're like a stallion. i love you. >> bill in connecticut? >> caller: boo-yah from the home of the corvette. bowling green, kentucky. >> we have a guy named robert from bowling green. bowling green, ohio, bowling
green, kentucky, doesn't matter. well our guy did go to bowling green, he is from ohio. let's stay with cramer. >> boo-yah, jim! sebastian, florida. >> sebastian inlet? >> caller: sebastian inlet. >> there's where i surf! good. ♪ [ cows moo ] [ sizzling ] more rain... [ thunder rumbles ] ♪ [ male announcer ] when the world moves... futures move first. learn futures from experienced pros with dedicated chats and daily live webinars. and trade with papermoney to test-drive the market. ♪ all on thinkorswim. from td ameritrade.
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ten days ago as part of the off the chart segment on june 11th, mark sebastian a brilliant technician, and the chief operating officer of pit.com predicted that the market was due for a serious sell-off. after the beating we have taken over the previous two days, well, i mean, what can i say? everyone is buzzing me, what is this guy thinking because sebastian was dead right. he was more than right than anyone i have seen in a long time. he nailed it as the bond named
game 7. given that the his method was accurate, what does he think will happen next? what did he use? he used the cebo volatility index also known as the vix. sebastian noticed it was working higher and higher and the s&p was stalled. that was his cue. in the past when we have seen that pattern it led to brutal sell-offs and he thought this time was no different. in short, everybody else liked the market when he said get out. that's why tonight we're running a special post pull back edition of off the charts. see what the vix is saying about the market now. at least as interpret by mark sebastian. unfortunately if you own stocks, sebastian believes the pain is not over. the hot hand says it's not over. the reason? when the averages go lower, especially the s&p 100, then it rises dramatically. during yesterday's drop the vix spiked over 20.
that is an ominous number for sebastian. take a look at this chart of the volatility going back to 2008. ever since the vix first drifted back below 20 at the end of 2008, remember, that was the really who are wren douss -- horrendous, great recession. when it broke above 20, the indexes had follow through. remember, when the vix goes higher the market's usually going higher. when he said, listen, it goes above 20, that means the market will go lower. the fiscal cliff deal when the vix spiked above 20 and then came back down. that's because they solved the cliff and many people thought they wouldn't. the fiscal cliff vix spike on the horizon. check out this s&p 500. when you look at the two together, sebastian thinks they still paint a fairly bleak picture. let me walk you through it. see the vix keeps climbing. while the s&p keeps breaking down. that's the pattern. sebastian, that means there's no currently no sign that the pain
is going to end. in his view this is a pattern that says that s&p will keep going lower. and the vix will keep going higher. so how is this situation going to play out then? well, when sebastian called the sell-off his reasoning was based on historical examples of when the vix spikes but the market doesn't. consider the charts from 2011 when the exact patterns showed up. back then, the vix started climbing. you see this climb. the s&p started dropping. see that drop. that's where we are. and in a similar case. now, they did it aggressively and it started before there was any downgrade of the u.s. debt. you see this was all before the debt and then the big worry at the time. in 2011 the s&p got obliterated in august. as the vix spiked. that's that pattern. we didn't find a bottom until two months later at the beginning of october when the s&p made a lower low, but the
vix failed to make a higher high. that was the buy signal, people. it happened to us here, didn't go higher. sos of this the bottom. and then it still went lower, even though it had this. so what happened is this was your signal to buy and this was your signal to continue to buy. because the s&p was still going down. while the vix was no longer making a new high. that's what we're waiting for. we're waiting for this to happen. but it could be some time before we get there. now we have pointed out over and over again that thing that controls the stocks is the bond market. the vix measures the fear that the bonds are generating right now and that's why sebastian thinks it's important to check out the futures versus the ten-year treasury futures. earlier in the year, when the bond prices went lower, the stock market would actually rally. bonds going lower, stocks rally. that's the way that things are generally supposed to work. remember as bonds go lower the yields rise. even in april when interest
rates began to climb, they began to rally as the ten year got slammed. over the last month and a half we entered a new normal. during the last two big sell-offs in the ten year, the s&p 500 has dived and dived hard. each time. for sebastian, as long as this relationship holds up with stocks falling, at the same time that bonds are going lower, then we're going to continue being in rough waters. the reason this is happening of course is because so many people crowded into high yielding dividend stocks that are a large part of the s&p when interest rates were incredibly low but now that the rate you can get from owning bonds is on the rise the income seekers, well, they're blowing out, they're fleeing the market, the stock market in droves. some of that is headed to bonds. but most of it is headed to the sidelines to wait for clarity that money is not fuelling anything least of all stocks. so now when rates are going higher, money is coming out of the s&p. here's the bottom line. mark sebastian called the sell-off based on the action of
the vix and looking at the charts right now his prediction is still more pain. you may not feel it after a nice day today, but sebastian thinks the market won't turn until the s&p goes down again and the vix fails to go higher. that's where he thinks we'll find the bottom. however, not all is lost. sebastian does believe -- we will not give up all the gains for the year. now he doesn't think we will. by 2014 he thinks the s&p could once again flirt with new highs. so short term, real pain. real pain. longer term some gain. stay with cramer. ♪
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what's your policy? don't tell me what i know. tell me what i don't know. tell me what i really need know. i know what the federal reserve did. i'm keeping a close eye on interest rates because if they continue to rise i believe that housing will get dinged. many feel when rates go up, housing will stay strong. i think it's an interesting supposition. i'll wait what the companies have to say about. i won't presume that strength. i know that auto sales remain strong. we heard that from carmax this morning. this is a terrific barometer of consumer strength even after the initial exuberance was disappointed by the report. we know that the consumer -- weak according to the owner of darden who claimed his paltry gross margins on the consumer.
in other words, if ben bernanke goes car shopping at carmax he stops buying bonds but if he dines at olive garden he should step up his buying. micron is saying all is well in semiconductor land. but you know to bond buy or not to bond buy? i have a brutal conclusion about the companies. carmax and micron are good operators. and darden has lost their way and start blaming themselves. what do i not know? what's really top of mind i think on monday and tuesday when we come in? what we should be worried about. first, what the heck is going on in china? i have no idea. it seems like there's some incredible stress in the banking system over there which feels like the stress we had in 2008 and 2009 in this country and the stress that europe had in 2011. stress in any banking system going to reverberate all over the place. we know from the big declines when the banks -- when we had the incredible decline in our banks because of the puny banks
in cyprus. in china, they're huge. they could take it down to 2 or 3% in a heart beat. and in brazil, many people to the streets in brazil, it's a million people. nobody protested they wanted a more capitalist government. could we see more socialism coming into brazil, a country that many thought would be strong going into the olympics. what could be worse, nothing. no wonder why gold has been weak. there's until today. russia is hurting to as the oilwell is becoming tapped out. their markets hitting lows that we haven't seen in ages. the bricks are going down brick by brick. finally all sorts of countries are being hurt by the rapid interest rates rise, especially those who had higher rates to attract top money. so much of latin america and asia could be hurting. we don't know. we just don't know. and when we don't know, that means we don't reach and we don't get aggressive.
we wait, we are patient. that is precisely waiting and patience, that's what i'm advising and prescribing to you right now. nothing more. stay with kramer. oh, he's a fighter alright. since aflac is helping with his expenses while he can't work, he can focus on his recovery. he doesn't have to worry so much about his mortgage, groceries, or even gas bills. kick! kick...
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best thing i can say about this week is that it is over. interest rates are ruling right now. so we have to keep an eye on them. one day we won't, but don't worry, it will get worked i'm jim cramer and i will see you monday! >> the two-day fed meeting is clearly the most important of the markets this week. the fed likely to signal tapering move. that's the headline. >> maybe i'm excited about the fed after all. >> the stocks are on fire. >> no taper in the statement today. >> we would continue to reduce the pace of purchases in measured steps through the first half of next year, ending purchases around mid-year. >> breaking news. the dow just down, touched down 300 points and we're down to 14.883, nearly a 2% drop. >> currently down by 280 points right now and this is the low of the day and the market is misinterpreting taper